Wednesday, January 30, 2013

Chupacabra Report

News that Gets My Goat

The Chronicle ran an op-ed this week from John W. Fainter, president and CEO of the Association of Electric Companies of Texas, titled “Facts show electric competition works in Texas.” Incredulous, I read the piece and thought it sounded reasonable..

“Texas legislative and regulatory leaders - as well as an independent market monitor overseen by the PUC and the Electric Reliability Council of Texas - have proved effective at policing our competitive electricity market.
“In short, I respectfully submit that returning to a regulated system would not benefit consumers. Electric competition, in fact, is working in Texas, and the numbers show it.

“Here are some numbers for those who buy electricity in CenterPoint Energy's service area: Last year it was common to find a one-year fixed price offer for electricity from a retail provider at 9 cents per kilowatt hour; variable price offers were as low as 5.2 cents per kilowatt hour.

“Prices are low in Texas' competitive market even though the Henry Hub spot price for natural gas is about 40 percent higher in January 2013 than it was in December 2001.
“The regulated price per kilowatt hour in CenterPoint's service area was 10.4 cents then. Factoring in inflation, the equivalent today would be 13.6 cents. Essentially, consumers today can buy electricity on a fixed-term contract for 44 percent less than the prices of 2001.”

-Wow, the December ’01 spot price was cheaper than today? Guess what; at $2.20, December’s price was the cheapest of that year. The average gas price in 2001 was $3.90/million btu; in 2012 the average price was $2.70, a decrease of over 30%, roughly equal to the 30% rise in the Consumer Price Index since then. But the Texas average today is 11.6 cents per kilowatt, just above the national average of 11.5 cents, and higher than the 10.4 cent price he cites from 2001.

Fainter cites price offers of 9 cents per KW for a one-year contract, and variable rate contracts as low as 5.2 cents per KW. What he doesn’t mention is that if you are unfortunate enough to let your contract lapse that you will fall into a ‘sucker contract’ as high as 15 cents per KW until you re-sign with somebody; a trap for the unwary.

He takes issue with a “Chronicle editorial claiming that municipally owned utilities in Austin and San Antonio have lower rates. Yet there are offers in competitive areas of the state that are lower than what Austin Energy and CPS customers in San Antonio pay. This is despite the fact that these municipally owned utilities avoid many of the costs that the competitive suppliers face.”

I’ve been looking at what residential customers in Austin and San Antonio pay. It’s not a simple comparison because their prices vary by usage, season and in some cases time of day. Austin Energy customers pay from 1.8 cents for those using less than 500 Kilowatt Hours during the months of October through May, to 11.4 cents for those using over 2,500 Kilowatt Hours from June to September.

San Antonio’s CPS charges 9.2 cents for 1000 KWHs, 11.1 cents for 1200 and 13.7 cents for 1500 KWH. At these rates, big users could pay more than the state average, but at least they have the incentive right: people that get their energy usage under control pay the lowest rates.

Here in Houston they practice the perverse incentive system, where the biggest users pay the lowest rates. This is wrongheaded because the cheapest Kilowatt Hours are the ones you don’t use. Utilities ought to reward customers for cutting their usage and for shifting their demand to off-peak hours. Instead; along with their accomplices in the State Legislature, they practice their traditional business model of ‘screwing people.’